Inventory Valuation

Topics: Inventory, Balance sheet, Asset Pages: 2 (550 words) Published: October 19, 2012
Inventories valuation
In this report, considers FIFO (First In, First Out)method and Weighted Average Cost (WAC) method. FIFO method (First In, First Out)is an asset-management and valuation method in which the assets produced or acquired first are sold, used or disposed of first and may be used by an individual or a corporation.

However, Weighted Average Cost is a method of calculating Ending Inventory cost. It takes Cost of Goods Available for Sale and divides it by the total amount of goods from Beginning Inventory and Purchases. This gives a Weighted Average Cost per Unit. A physical count is then performed on the ending inventory to determine the amount of goods left. Finally, this amount is multiplied by Weighted Average Cost per Unit to give an estimate of ending inventory cost.

Each business enterprise must choose between FIFO method or WAC method to record their business operation and transaction. Whereas we can not deny that many company almost use FIFO method compare with WAC method due to FIFO method show the transaction of business cleanly and easy to calculate.

is the original cost purchased price. Valuation in terms of money of effort, material, resources, time and utilities consumed, risks incurred, and opportunity forgone in production and delivery of a good or service. All expenses are costs, but not all costs (such as those incurred in acquisition of an income-generating asset) are expenses.

Net Realizable Value
The value of an asset that can be realized by a company or entity upon the sale of the asset, less a reasonable prediction of the costs associated with either the eventual sale or the disposal of the asset in question. NRV is the expected market price less any cost to be incurred in getting the inventories for sale.

In relation to inventory, net realizable value (NRV) is the estimated selling price in the ordinary course of business minus any cost to complete and to sell the goods. NRV is one of the...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Inventories Essay
  • Inventories Essay
  • Inventories Essay
  • Essay about Inventory and Cost
  • Accounting (Inventory) Essay
  • Inventory Control Research Paper
  • Agriultural inventory Essay
  • Inventory Control Essay

Become a StudyMode Member

Sign Up - It's Free